Money Advice Guide

I know a woman in her sixties. She worked for a company for a little more than a decade as an administration and office assistant for a staff of one hundred sales people, who loved her dearly. She always made sure all the faxes got to their desks; the stationery stock was full and each staff member had what he needed.

Beyond her job description, she was like a mother to all of them: making sure the toilets got cleaned, old food was removed from the fridge and decorating the entire floor which the department occupied. She worked hard and never complained. She was always smiling, friendly and polite.

She felt good about being a ‘mother’ to all the people who entered and left that department. She was comfortable with her position. No-one else could do the things she did. And she did them better than anyone else in the building.

One day, she went to work as usual. After doing her morning chores, she was invited to the office, where she was told her services were no longer needed. The company was undergoing certain cost-cutting measures in every department and unfortunately, her role would have to be sacrificed. She was then asked to leave the building as soon as possible. She was assured, however, that before having made the decision, every attempt had been made to find a position for her somewhere within the company.

She has financial obligations to fulfil and she still hasn’t saved enough for her retirement. She still has credit to pay off and she was saving for a trip overseas, something she never got around to doing in her younger years. She wanted to save up to establish a book-selling business. Suddenly, she would have to re-evaluate her plans. Losing a job and nearing retirement age, she will have to relinquish some of the things she had dreamt for herself.

I am sure you have heard hundreds of similar stories like these. Just five months before writing this article, I had already read about companies cutting costs by laying off jobs. Their main reason is to remain competitive, so they would not have to raise the prices they charge to their customers. Companies are outsourcing jobs overseas because the labour costs in other countries are relatively cheap compared to the local currency and sometimes because of significant skills or technological advantages. Other businesses lessen staff when sales drop and they can no longer sustain to pay the same number of people they have on their payroll. No organisation - not even a big, established business - is immune from the need to become leaner in an ever-increasingly competitive market environment.

In the past, most people believed the companies or the governments - whom they work for - could guarantee them a job for life. Nowadays, I think more and more people are becoming increasingly aware that expecting to have a job-for-life is unrealistic. It is a dire predicament to be working everyday, taking care of someone else’s business and realising that at the end of one’s career, years of service do not guarantee one’s well-being. Because of this, I believe that people are now looking to improve their chances of having enough funds to meet their needs and wants after retirement.

I think there is a dawning awareness that the ultimate responsibility for one’s own well-being lies within each individual. People are beginning to understand that their boss or the company they work for does not have an obligation nor the ability to ensure that they are taken care of when they finish working for them.

According to an article written by John Roskam*, based on a forthcoming Institute of Public Affairs (IPA) Backgrounder on self-employment and the self-reliant society, the trend to self-employment will speed up in coming decades. Five reasons explain this change:

1. Our societies will continue to develop knowledge-intensive and service industries.
2. Jobs of the future need more education; however, better educated workers might opt to work for themselves instead.
3. Older workers are more comfortable with being self-employed than the younger workers, which might indicate individuals would prefer to work for themselves as they grow older.
4. Individuals want more control and flexibility over their working arrangements and self-employment allows for this.
5. Individuals are more willing to assume responsibility for the decisions that affect their lives and their families.

In addition to this trend, more and more people are now seeking to gain greater control over their financial assets.

What we can all learn from this article is the idea that we do not have to rely on our employers to be there for us when we desperately need them to pay us our periodic paycheques at the end of our working days. There are alternatives and, while we still can, I believe we owe it to ourselves and our families to have a back-up plan and look at every single opportunity available. The question for you is this: Do you have a back-up plan?

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Footnotes:

* “Self-Reliance and the Self-Employment Revolution” http://www.ipa.org.au/files/news_953.html (21st March 2005).

Marquez Comelab is the author of the book: The Part-Time Currency Trader. He believes that trading and investing are skills people should learn while they are still young so when they grow old, they do not have to rely too much on their pension. See: http://marquezcomelab.com.

Tags: currencies, forex, futures, invest, options, shares, stocks, trading, Wealthcurrencies, forex, futures, invest, options, shares, stocks, trading, Wealth

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You may recall that following the 9/11 attacks, the stock market closed for several days. It re-opened on 9/17 with the Dow down 7%.

That was it for one couple I know, Mary and Frank. The attack on the country, coupled with the attack on their personal finances, was too much. They were worried terrorism would sink our economy and stock market like the Titanic, so they sold all their market investments.

Was it the right move?

Nope. In less than two months, the situation changed drastically: Within 53 days, the market recovered all it had lost. And by the end of the year, the market was 12% higher than it had been when Mary and Frank had bailed out. Now their greatest problem was not having a strategy to get back in. In their uncertainty and confusion, they became paralyzed by fear of making the wrong move again.

You’re well aware that September 2001 was not the first time the U.S. weathered catastrophe that directly impacted investors. Among other events, we’ve been through a depression, World War II, the Cuban missile crisis and an assassinated president.

Yet the stock market has continued to thrive.

Despite market resilience, a lot of people lost a lot of money. It might be tempting to think that if investors had been more informed about what was happening geopolitically, they could have headed off personal financial devastation. But that’s a sucker punch. Now that we can be acutely aware of every twist and turn in the world, does it make sense to invest based on international political and military posturing? Not if you want to make money.

Here’s another example. Shell-shocked, Janice met with her financial advisor in March of 2003. She’d seen the market tank through the horrific bear market from 2000 through 2002. She’d read sordid tales of corporate theft that cost investors billions and, in many cases, their retirement. She was worried by accounting scandals. And, of course, there was this problem in Iraq.

Janice was convinced that any one of these events could mean disaster for her investments. In her mind, all of these things happening at the same time meant certain financial catastrophe. Demoralized, Janice sold all her holdings. And from an emotional standpoint, you couldn’t blame her.

But from March of 2003 through the end of 2003 the Dow rose 32%. Janice missed out completely.

Our market has survived everything thrown at it. Unfortunately, we’ll most likely always have a crisis to overcome. The current terrorist problem could be with us for many years, and that’s certainly a human tragedy. However, no one can revoke the business cycle. There will always be companies that make great products and high profits. Those companies will expand, and the value of those companies will grow. If you own shares in those companies, your wealth will expand.

Even though the world can be a scary place, history reveals that catastrophes end up as just blips on the investing radar screen. Political and military disasters have never dealt a death blow to our financial markets. In fact, the longest time they ever took for recovery from a military attack was nine months, back in 1941 after Pearl Harbor.

People lose money in tough times when they don’t have a coherent, predetermined strategy for entry to and exit from the market. If you want to grow your assets safely, ignore military and political events. Establish a plan for buying and selling based on what the market tells you, not the nightly news. Then let that plan dictate your decisions rather than be swayed by your emotions, which will be understandably strong in times of stress. But if you want to weather any storm, you must stay the course.

In sum, listen to the market, not the media reports. Develop what I call a “safety-net strategy,” where the impact of world events is diminished, yet those events never dictate your strategy. Such a strategy assesses real instead of perceived risks in the market. In future columns, I’ll be sharing what those real risks are and how to create a safety-net strategy that will give you safe harbor in any economic climate.

Neal Frankle is the author of Why Smart People Lose a Fortune: 5 Steps to Restoring Your Wealth and Sanity. He helps affluent clients establish and implement a safety-net strategy to protect their wealth. He also helps other professionals, such as CPAs, to do the same thing for their clients. To contact him, send e-mail to Neal@WealthResourcesGroup.com.

Neal Frankle
(818) 621-2556 (mobile)
(818) 716-3100 (office)
neal@wealthresourcesgroup.com

Tags: author, business, cpa, estate planning, finance, insurance, invest, money, Portfolio, rv, taxes, Wealth, womenauthor, business, cpa, estate planning, finance, insurance, invest, money, Portfolio, rv, taxes, Wealth, women

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